Trade of the Day: Stocks, oil and futures gain on supportive measures; US Treasuries, gold retreat.
Quote of the Day: “Bank of Thailand reaches for its last few bullets,” said Barclays economists in a research note after the Thai central bank cut its policy rate by 25bp to 1.00%, a record low which was in line with Barclays’ view but a surprise relative to consensus expectations. “We now expect the BoT to cut the policy rate by another 25bp to 0.75% this year.”
Stock of the day: China’s largest lithium producer and a supplier to Tesla, Ganfeng Lithium rose as much as 26% riding the coat-tails of the massive Tesla rally which also inspired a surge in shares of Nio, China’s biggest electric vehicle maker. Tesla’s shares have risen 37% in only two days with market capitalization now over $150 billion. Additionally, Ganfeng is jointly developing the Caucharí-Olaroz project, located in Jujuy, Argentina. Production from the project is expected in early 2021, with output capacity estimated at 40,000 metric tons per year.
Number of the Day: 90% The percentage of flights to mainland China canceled by Cathay Pacific Airways in view of the coronavirus. The airline said it would translate into a reduction of 30% of its capacity across the company. Later on Wednesday, the airline said it was asking all 27,000 employees to take three weeks of unpaid leave.
Tip of the Day: “We are positive on Asia ex-Japan, and to a lesser extent, emerging markets more generally. Asia is particularly vulnerable to a worsening of the coronavirus crisis. However, longer term, it should be a prime beneficiary of an upturn in global manufacturing activity and should more than recapture any short-term losses. Its relatively cheap valuations also remain a long term attraction,” said Kingswood, UK-based wealth manager, while adding that they were “cautious” on the US and “not overly keen on continental Europe.”
Asian markets rallied on expectations Beijing would intervene and stimulate the world’s second-biggest economy even as the human toll of the coronavirus outbreak continued to climb – the infected cases tally neared 24,000 with deaths mounting close to the 500 mark. An opinion piece in state-backed Securities Times said counter-cyclical measures would iron out short-term fluctuations in the economy.
The measures are being unveiled even as a growing number of analysts are cutting their growth forecasts for the world’s second-biggest economy. UBS said: “We downgraded China’s 2020 GDP growth forecast to 5.4% (from 6%). The risk to our forecast is biased on the downside.” DBS Bank said real GDP growth in 2020 will likely be 5.3%, lower than their initial projection of 5.8%. Meanwhile, China’s Ministry of Commerce said it is making relaxations in its import rules to allow the control of the outbreak and prevent its spread.
The MSCI Asia-Pacific ex-Japan index rose 0.3%, Australia’s S&P ASX 200 climbed 0.4% and the Nikkei 225 jumped 1.1%. Hong Kong’s Hang Seng benchmark jumped 0.42% as basic materials, consumer cyclicals and healthcare shares drove gains.
It’s not just the Chinese authorities who are rolling out supportive measures. Singapore and Thailand also indicated there could be more easing down the road.
The Singapore dollar weakened after the country’s central bank issued a statement it had enough room for easing its monetary policy to combat economic weakness from the coronavirus.
“There is sufficient room within the policy band to accommodate an easing of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) in line with the weakening of economic conditions as a result of the outbreak of the 2019 novel coronavirus (2019-nCoV) in China and other countries, including Singapore,” the central bank said.
The Thai baht also fell after the central bank shocked the market with an unexpected rate cut.
“We don’t know how long it will take before the coronavirus is brought under control, but based on the assumption that it will not be until Q2 at the earliest before the situation returns to normal, we think further easing is likely. We have penciled in a further 25bp cut for the BoT’s meeting on 25th March,” said Capital Economics in a note after the Bank of Thailand (BoT) decision.
European shares are trading higher with the Stoxx Europe 600 Index up 0.7% and S&P futures, 0.6% higher, indicating a firm start at Wall Street.